The Tragic Bull Market Culture

“Like champagne, bull markets remove inhibitions.” –James Grant My readings over the last several weeks have consisted primarily of David Stockman and Jim Grant– two sane voices in the insane financial world. Each have contributed wondrous thoughts and reflections on the nature of 21st century finance, which is primarily a story of the “corruption of…

The Discrepancy between Stocks and the Economy

Adapted, with some changes and edits, from my recent Letter to Investment Clients.  In the last week, several economically important things have happened and they can be summarized together as a discrepancy between the stock market and “the economy.”  First, and of primary importance, on Monday we got the 2016 first quarter GDP forecast number,…

Economy on the Deathbed, Good Riddance

Writes Barrons: Standard & Poor’s reported Thursday that the average corporate credit rating is double-B, two notches below investment grade. That’s near a 15-year low. More ominous — S&P sees this as a sign that defaults could spike and the corporate credit cycle has peaked. Given  easier lending conditions since the financial crisis, companies with weaker…

The Needed Pain Wrought by Saving

The endgame of monetary side manipulations is upon us. Since 2008, central banks have done what they thought was needed to bring the markets back from the pain they experienced during the crash. The problem, of course, is that these Keynesians and Monetarists placed the high level of stock markets as the goal of “policy”…

On Inflation, Rate Hikes, and Falling Markets

There are a handful of themes out there on recent market action that are either totally wrong or otherwise highly misleading. For instance, regarding the recent calamity in the capital markets, one especially apparent dichotomy has presented itself as offering two choices as to what, exactly, is causing the painful turbulance. There are some who, in a complete…

General Stock Market Index Performance is a Result of the Fed

The way that most people think about the stock market’s rising and falling is usually at odds with the economic reality. This is not entirely their fault; there is an academic consensus at play which reinforces the confusion, this consensus, of course, being the Keynesian paradigm. When the financial media talks about the stock market,…

WSJ: “When the Fed Lifts Off, This Is What to Watch at Banks”

WSJ: Years of superlow rates have encouraged complacency about the cost of funding. During the era of excess reserves, there was little reward for monitoring a bank’s ability to attract low-cost deposit funding. If anything, banks faced criticism for having “too many” excess reserves. That is likely to change rapidly when the Fed begins to…

John Hussman on what benefits from ZIRP

From his weekly market comment, John Hussman writes: Understand this in no uncertain terms: the only economic activities that are encouraged by zero interest rates are activities so marginal and unproductive that they can’t survive even a slightly higher hurdle rate, or where the primary cost of the activity is interest itself, such as leveraged…

Paul-Martin Foss on the Fed and Interest Rates

Paul-Martin Foss’ latest article over at his site highlights several important points including the fact that the Fed, while it recently refused to raise the Federal Funds rate, cannot suppress rates forever. While the Fed can indirectly affect rates throughout the entire economy, the fact of the matter is that the market ultimately is in…